Question 1

The multiple by which the chartered banking system can increase the supply of money on the basis of each dollar of excess reserves is equal to:

Accepted Answer

A)  the reciprocal of the desired reserve ratio.
B)  1 minus the desired reserve ratio.
C)  the reciprocal of the income velocity of money.
D)  1/MPS.E) B) and C)
F) A) and D)

Question 2

A $200 price tag on a cashmere sweater in a department store window is an example of money functioning as a:

Accepted Answer

A)  unit of account.
B)  standard of deferred payments.
C)  store of value.
D)  medium of exchange.E) A) and B)
F) A) and C)

Question 3

Currency and coins held by banks are part of the M1 definition of money supply.

Accepted Answer

A) True 
 B)False

Question 4

The primary purpose of the desired reserve is to provide the means by which the monetary authorities can influence the lending ability of chartered banks.

Accepted Answer

A) True 
 B)False

Question 5

The following balance sheet is for the First National Bank.Assume the reserve ratio is 15 percent.  Refer to the above data.This bank can make new loans of up to:

Accepted Answer

A)  $50,000
B)  $41,000
C)  $27,000
D)  $32,000E) All of the above
F) A) and B)

Question 6

Stock market price quotations best exemplify money serving as a:

Accepted Answer

A)  store of value.
B)  unit of account.
C)  medium of exchange.
D)  index of satisfaction.E) None of the above
F) A) and D)

Question 7

The smallest component of the money supply (M1)  is:

Accepted Answer

A)  currency.
B)  chequable deposits.
C)  small time deposits.
D)  large time deposits.E) A) and C)
F) B) and C)

Question 8

The following is a consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent.  Refer to the above information.The maximum amount by which this chartered banking system can expand the supply of money by lending is:

Accepted Answer

A)  $120 billion.
B)  $300 billion.
C)  $480 billion.
D)  $600 billion.E) A) and B)
F) B) and C)

Question 9

The balance sheet below is for chartered bank ABC.Assume the desired reserve ratio is 20 percent.All figures are in billions.  Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Accepted Answer

A)  $5,000 and $110,000.
B)  $5,000 and $25,000.
C)  $5,000 and, 22,000.
D)  $5,000 and, 27,000.E) B) and C)
F) A) and B)

Question 10

Refer to the above information.The value of the dollar in year 4 is:

Accepted Answer

A)  $.25.
B)  $.33.
C)  $.50.
D)  $2.00.E) A) and D)
F) A) and C)

Question 11

The basic source of money in our economy is the Department of Finance.

Accepted Answer

A) True 
 B)False

Question 12

Chartered banks monetize claims when they sell securities to the Bank of Canada.

Accepted Answer

A) True 
 B)False

Question 13

The balance sheet below is for chartered bank EFG.Assume the desired reserve ratio is 25 percent.All figures are in billions.  Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Accepted Answer

A)  $140 and, $560.
B)  $51 and, $204.
C)  $16 and, $376.
D)  $16 and, $64.E) C) and D)
F) B) and C)

Question 14

1.Foreign currency deposits of residents booked in Canada 2.Personal savings deposits at the chartered banks
3) Currency (coins and paper money) 
4) Demand deposits
5) Government securities
6) Non-personal notice deposits at the chartered banks
Refer to the above information.Which of the following is not included in any of the official definitions of money?

Accepted Answer

A)  item 1
B)  items 1 and 4
C)  no item
D)  item 5E) B) and D)
F) C) and D)

Question 15

A chartered bank that is temporarily short in the level of reserves it wishes to hold will borrow from another chartered bank:

Accepted Answer

A)  overnight.
B)  over a week.
C)  for a month.
D)  for six months.E) B) and C)
F) All of the above

Question 16

If we assume m to be equal to the maximum amount of dollar that can be created from a single dollar of excess reserves and R to be equal to the desired reserve ratio, then we can say that for the banking system:

Accepted Answer

A)  m = R - 1.
B)  R = m/1.
C)  R = m - 1.
D)  m = 1/R.E) A) and C)
F) All of the above

Question 17

Money eliminates the need for a coincidence of wants primarily through its use as a:

Accepted Answer

A)  unit of account.
B)  medium of exchange
C)  store of value.
D)  standard of confidence.E) B) and C)
F) A) and D)

Question 18

The M2+ definition of the money supply includes:

Accepted Answer

A)  M1 plus the M2.
B)  M2 plus the coins and paper money held by the chartered banks.
C)  M2 plus the deposits at trust and mortgage companies, credit unions, caisses populaires, and government savings institutions, plus money market mutual funds and life insurance annuities.
D)  M2 plus the government securities held by the chartered banks.E) B) and C)
F) All of the above

Question 19

If actual reserves in the banking system are $50,000, excess reserves are $5,000, and demand deposits are $225,000, then the money multiplier:

Accepted Answer

A)  is 10.
B)  is 5.
C)  is 4.
D)  cannot be determined from this information.E) A) and D)
F) B) and D)

Question 20

When a bank has a cheque drawn and cleared against it:

Accepted Answer

A)  excess reserves in the banking system decline.
B)  the nation's total money supply falls.
C)  the bank's balance sheet does not change.
D)  the amount of desired reserves the bank has will fall.E) A) and B)
F) All of the above

Exam 14: B: Money, Banking, and Money Creation

If actual reserves in the banking system are $50,000, excess reserves are $5,000, and demand deposits are $225,000, then the money multiplier:

Correct Answer
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The basic source of money in our economy is the Department of Finance.

Correct Answer
verified

The following balance sheet is for the First National Bank.Assume the reserve ratio is 15 percent. Refer to the above data.This bank can make new loans of up to:

Correct Answer
verified

A $200 price tag on a cashmere sweater in a department store window is an example of money functioning as a:

Correct Answer
verified

A chartered bank that is temporarily short in the level of reserves it wishes to hold will borrow from another chartered bank:

Correct Answer
verified

The following is a consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent. Refer to the above information.The maximum amount by which this chartered banking system can expand the supply of money by lending is:

Correct Answer
verified

If we assume m to be equal to the maximum amount of dollar that can be created from a single dollar of excess reserves and R to be equal to the desired reserve ratio, then we can say that for the banking system:

Correct Answer
verified

The multiple by which the chartered banking system can increase the supply of money on the basis of each dollar of excess reserves is equal to:

Correct Answer
verified

The balance sheet below is for chartered bank ABC.Assume the desired reserve ratio is 20 percent.All figures are in billions. Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Correct Answer
verified

Currency and coins held by banks are part of the M1 definition of money supply.

Correct Answer
verified

When a bank has a cheque drawn and cleared against it:

Correct Answer
verified

Refer to the above information.The value of the dollar in year 4 is:

Correct Answer
verified

The primary purpose of the desired reserve is to provide the means by which the monetary authorities can influence the lending ability of chartered banks.

Correct Answer
verified

Correct Answer
verified

Chartered banks monetize claims when they sell securities to the Bank of Canada.

Correct Answer
verified

The smallest component of the money supply (M1) is:

Correct Answer
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The balance sheet below is for chartered bank EFG.Assume the desired reserve ratio is 25 percent.All figures are in billions. Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Correct Answer
verified

The M2+ definition of the money supply includes:

Correct Answer
verified

Stock market price quotations best exemplify money serving as a:

Correct Answer
verified

Money eliminates the need for a coincidence of wants primarily through its use as a:

Correct Answer
verified

Exam 14: B: Money, Banking, and Money Creation

If actual reserves in the banking system are $50,000, excess reserves are $5,000, and demand deposits are $225,000, then the money multiplier:

Correct AnswerverifiedShow Answer

The basic source of money in our economy is the Department of Finance.

Correct AnswerverifiedShow Answer

The following balance sheet is for the First National Bank.Assume the reserve ratio is 15 percent. Refer to the above data.This bank can make new loans of up to:

Correct AnswerverifiedShow Answer

A $200 price tag on a cashmere sweater in a department store window is an example of money functioning as a:

Correct AnswerverifiedShow Answer

A chartered bank that is temporarily short in the level of reserves it wishes to hold will borrow from another chartered bank:

Correct AnswerverifiedShow Answer

The following is a consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent. Refer to the above information.The maximum amount by which this chartered banking system can expand the supply of money by lending is:

Correct AnswerverifiedShow Answer

If we assume m to be equal to the maximum amount of dollar that can be created from a single dollar of excess reserves and R to be equal to the desired reserve ratio, then we can say that for the banking system:

Correct AnswerverifiedShow Answer

The multiple by which the chartered banking system can increase the supply of money on the basis of each dollar of excess reserves is equal to:

Correct AnswerverifiedShow Answer

The balance sheet below is for chartered bank ABC.Assume the desired reserve ratio is 20 percent.All figures are in billions. Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Correct AnswerverifiedShow Answer

Currency and coins held by banks are part of the M1 definition of money supply.

Correct AnswerverifiedShow Answer

When a bank has a cheque drawn and cleared against it:

Correct AnswerverifiedShow Answer

Refer to the above information.The value of the dollar in year 4 is:

Correct AnswerverifiedShow Answer

The primary purpose of the desired reserve is to provide the means by which the monetary authorities can influence the lending ability of chartered banks.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Chartered banks monetize claims when they sell securities to the Bank of Canada.

Correct AnswerverifiedShow Answer

The smallest component of the money supply (M1) is:

Correct AnswerverifiedShow Answer

The balance sheet below is for chartered bank EFG.Assume the desired reserve ratio is 25 percent.All figures are in billions. Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Correct AnswerverifiedShow Answer

The M2+ definition of the money supply includes:

Correct AnswerverifiedShow Answer

Stock market price quotations best exemplify money serving as a:

Correct AnswerverifiedShow Answer

Money eliminates the need for a coincidence of wants primarily through its use as a:

Correct AnswerverifiedShow Answer

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